All this while the Fed adds another $85 billion monthly of so-called money printing, the Bank of Japan embarks on an even bigger program relatively speaking, and multiple other central banks either are cutting rates or contemplating the type of quantitative easing programs associated with reflating economies.

"Gold is telling us that the global economy is on thin ice," said Michael Pento, founder of Pento Portfolio Strategies and a staunch gold advocate. "There are parts of the economy that are deflating like Europe and China and parts that are inflating like the United States and Japan. So it's a battle."

Indeed, it's hard to swallow the notion of deflation hitting the U.S. and Japan when looking at the stunning stock market gains in both places.

Moreover, monetary base growth in the U.S. has been surging lately, up about 7 percent on an annualized basis.

But the U.S. market at least has been choppy as of late, enduring a spate of consecutive up-and-down days and itself showing signs that while investors are buying equities, they're still trying to avoid extreme risk.

Though the Standard & Poor's 500 (^GSPC) stock index is up 8.5 percent in 2013, materials this week became the first of its 10 sectors to turn negative. That's an ominous sign as materials can be an effective bellwether for growth. The best sectors are health care, consumer staples and utilities.

On the Dow industrials, which have surged 11 percent, the biggest loser by far is Caterpillar (CAT), which has tumbled 10.3 percent including 7 percent in just the past month. The global construction equipment manufacturer also is one of those key areas where economists turn to get a handle on growth expectations.

But it is the gold trade that often provides the best delineator between the inflation and deflation trade.

The metal has hit bear market levels, tumbling 22 percent since its early October high.

Gold bulls at Bank of America Merrill Lynch have walked back their $2,000 per ounce 2014 forecast, instead expecting another $150 drop from the $400 loss already on the books.

"Gold is an idiosyncratic commodity," Michael Hartnett, BofA's chief investment strategist, said in a note to clients. "That said, secular turning points in the gold price have coincided with secular turning points for the economy and asset markets.."

Hartnett advised investors to expect still lower bond yields, which currently are at 2013 lows, as well as a rising dollar and more strength in defensive stocks.

Investors have been responding in kind.

The popular SPDR Gold (GLD) exchange-traded fund, which allows investors to play the gold market without having to take physical possession of the metal, has seen nearly $11 billion in investor outflows this year, easily the most of any ETF, according to Index Universe.

At the same time, the iShares Barclays TIPS ETF (TIP), which tracks the government's Treasury Inflation-Protected Securities bonds, has lost nearly $1.8 billion, the sixth-highest among its peers in the $1.44 trillion ETF space.

The inflation rate for March was just 1.47 percent, down from 1.98 percent and the lowest since July 2012.

James Bullard, the president of the St. Louis Fed, told reporters this week that if inflation stays so low the central bank may have to look at accelerating the $85 billion a month in Treasurys and mortgage-backed securities it is purchasing. The Fed has set a 2.5 percent inflation rate as the target before it considers raising interest rates.

Still, an enduring deflation trade is a tough sell at least among economists.

Pento points to rising food and health care costs as well as the monetary base increase as obvious signs that inflation remains alive and well.

University of Maryland economist Peter Morici said the high consumer prices that are a byproduct of inflation aren't likely to dissipate soon.

"I don't see falling prices as a looming threat," he said. "The reason for that is the Fed is pumping a lot of money into the system."